Debt management plans: what you should know News Credit

With 1,797 of workers losing their jobs in the last three months of 2011 and one property being repossessed every 15 minutes, its little surprise that the demand for debt management services has peaked in recent times.

The rising cost of living, coupled with the drop in income for many households, has meant that more people than ever are struggling with unmanageable levels of debt. Whilst it can be very tempting to bury your head in the sand and hope that things will somehow improve, experts agree that tackling problems sooner rather than later is the best approach.

However, the job of contacting all your creditors and agreeing a repayment schedule can seem daunting and emotionally exhausting, which is why some people opt to get professional help from companies such as Baines and Ernst.

Baines and Ernst are a debt management company, which like many others in the sector, offer individuals who are struggling with their finances the option of a Debt Management Plan.

A Debt Management Plan is a way to pay back unsecured debts and is tailored to each individual?s financial needs. It involves consolidating all of your debts into one monthly repayment, which the management firm (e.g. Baines and Ernst or equivalent) would distribute between your creditors. In order to build a successful plan, you need to provide details of all your financial commitments, such as rent, utility bills and council tax, so the advisor can assess how much you can comfortably afford to repay on your unsecured debts each month.

Once your assessment is complete, the debt experts will contact your creditors to let them know you are having difficulties and to ask them to accept a lower repayment. In many cases, creditors agree to freeze interest and charges once they know you are on a formal debt plan, thereby helping you to pay off what you owe.

A Debt Management Plan can help you with the problems of trying to communicate and juggle multiple creditors and can ease the stress of debt, by taking away the burden of having to organise the repayments. If creditors agree to freeze interest and charges it could also be a far more cost-effective way to clear your debts.

One of the other advantages is that it is a flexible contract, tailored to your own finances. Therefore, should your situation improve and you can afford to pay more, you are free to do so.

A Debt Management Plan helps you to clear unsecured debts such as store cards, credit cards, payday loans, overdrafts and catalogue accounts. Bills like rent / mortgages, utilities, council tax and child maintenance cannot be included as they are considered as secured debts. Rest assured these types of secured debts ? as well as food and travel ? are all taken into account before creating a repayment plan for you.

If you want to know more, you should ensure that whichever debt management firm you pick is registered with DEMSA (such as Baines and Ernst), as this means they will operate according to a code of conduct that is approved by the Office of Fair Trading.

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